In recent times, India has been often termed as the only, truly emerging market in the world. There is no doubt about the fact that a part of this growth is fueled by the micro, small and medium enterprises of the country. The SME sector contributes to over 40% of the total GDP and is a vital source of employment for India’s growing population. Recognizing the importance of SME growth in the post-demonetization era, the government of India has launched some business loan schemes and has also boosted other existing ones. Here’s a look at few such government loans for small business in India –
1. Pradhan Mantri Mudra Yojana (PMMY)
Pradhan Mantri Mudra Yojna is a scheme initiated by the Government of India to provide loans up to Rs. 10 lakh to non-corporate, non-farm small/micro enterprises. This scheme provides people involved in non-farm activities to avail loans up to Rs. 10 lakh. The MUDRA Loan scheme was proposed with the motive of including business people who are a part of NCSBS (Non-Corporate Small Business Sector) as well as ‘own account enterprises’ into the formal banking system and routine. Typically NCSBS in India includes street vendors, small repair shop owners, small scale industries and traditional artisans. These small informal businesses provide employment to roughly 10 crore Indians.
The scheme has three categories under which loans are available:
- Shishu – For loan amount up to Rs. 50,000
- Kishor –For loan amount from Rs. 50,001- Rs 5 lakh
- Tarun – For loan amount more than Rs. 5 lakhs and up to Rs.10 lakh
2. The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a trust, which was launched on 30th August 2000 launched by the Ministry of Micro, Small and Medium Enterprises, Government of India, and the Small Industries Development Bank of India (SIDBI).
The primary aim of the CGTMSE scheme is to give credit guarantee to financial institutions that provide loans to SMEs and MSMEs. CGTMSE aims to encourage entrepreneurs to take collateral-free loans for starting businesses without fearing the possibility of failure of repayment. The trust fund will reimburse the lending institution up to a certain limit, in case the borrower is unable to.
This repayment is done against the entire loan along with the interest for a period of 3 months and/or the outstanding loan amount along with its interest calculated from the date of filing the suit or the day when the loan becomes a non-performing asset, whichever is lower.
3. Credit Guarantee Fund Scheme For Micro And Small Enterprises
Of all the problems faced by the MSEs, the overall lack of timely and adequate credit at reasonable interest rate is one of the most pertinent issues. The foremost cause for low availability of bank finances to this sector is the perception the banks have of the high-risk involved in lending to MSEs. They therefore insist on collaterals, which are not easily available with these enterprises. The problem is more serious for micro enterprises requiring small loans as well as for entrepreneurs who are just starting out. The Credit Guarantee Scheme for Micro and Small Enterprises (CGS) was launched by the Government to make collateral-free credit available to the micro and small enterprise sector.
The credit facilities available under the scheme are both term loans and working capital facilities up to Rs.1 Crore, extended without any collateral security and/or third party guarantee, to a new or existing micro and small enterprise.
4. The Stand Up India Scheme
The Stand Up India scheme’s objective is to facilitate bank loans between Rs.10 lakhs and Rs.1 Crore to at least one Scheduled Caste or one Scheduled Tribe borrower and at least one woman borrower per bank branch for setting up a greenfield enterprise. The particular borrowing enterprise may be a part of the manufacturing, services or the trading sector. In case of non-individual enterprises, at least 51% of the shareholding and controlling stake should be held by either an SC, ST or woman entrepreneur.
5. National Small Industries Corporation Subsidy
The NSIC subsidy for small businesses offers two kinds of financial assistance – Raw Material Assistance and Marketing Assistance. Under the raw material assistance scheme, both indigenous and imported raw materials are covered. Under the marketing support, funds are given to SMEs for enhancing their competitiveness and broadening the market value of their products and services. The NSIC is mainly focused on funding small and medium enterprises who are looking at improving their manufacturing quality and quantity.